The cash equities markets put in a poor performance across the board last year, as continued economic and regulatory uncertainty led investors to flee the equities markets.

The decline of the Asia-Pacific market, however, which fell some 19% by dollar value traded compared with 2011, according to analysis of data provided by Thomson Reuters, caught some by surprise.

The regional decline was one percentage point greater than that of the US, which was buffeted by the fiscal cliff crisis, and not far behind Europe, where ongoing uncertainty surrounding sovereign debt saw trading by euro value slump 21%. At the same time, research from US consultancy Greenwich Associates, published earlier this month, showed that commissions associated with trading Asian equities contracted 13% in the 12 months ending August.

The disappointing figures highlighted the extent to which the Asia-Pacific equities markets take their cue from the US and Europe, said brokers.

Stephane Loiseau, managing director, head of cash equities, Asia-Pacific and deputy global head of execution at Societe Generale, said: “The Asian markets are more dependent on US and European markets in terms of establishing daily market behaviour, and the challenging situation in Europe in 2012 definitely had an impact in terms of derisking against Asian equities.”

Keith Ducker, chief investment officer at Tora, a firm that provides outsourced trading services and technology to Asia-Pacific buyside firms, said: “The US was a big driver of the Asia-Pacific markets last year, with the US election and then the fiscal cliff problem creating a lot of hesitation.”

Commission contraction has hit broker revenues and the region has not escaped the widespread job cuts sweeping the industry, with banks including Barclays, Nomura, Deutsche Bank and Morgan Stanley all having cut across trading and sales businesses in the region during the past year.

But while the picture looks gloomy, brokers argue that the outlook is brighter for Asia-Pacific than for the US and Europe. Loiseau said: “The dynamics of the Asia-Pacific region are different due to the complexity of the market structure, where you have to take a market-by-market view. The 18% down turnover number hides significant disparities between markets.”

China and Hong Kong acted as the main drag on the overall region, falling around 20% combined due to a drop off in the large initial public offerings that buoyed the market during 2010 and 2011. Some developed markets were resilient compared with the overall regional slump, however, with Japan down only 10% despite falling into its fifth recession in 15 years and ongoing uncertainty surrounding the national election and the devaluation of the currency.

Loiseau added that there were several highlights. He said: “The emerging markets in Asia tend to be less correlated, and you can see an increased institutional interest in some of the narrow markets where volumes are 30% up, such as the Philippines and Vietnam.”

The start of the year has also given cause for cautious optimism, with value traded in Asia-Pacific for January so far up 35% on the same month a year ago.

Per Loven, head of international corporate strategy at Liquidnet, the international trading network, said: “We have not seen a decline in line with the wider market. We’ve seen an increased allocation towards emerging markets.”

This chimes with data from EPFR Global, an independent provider of fund flows information, which found that emerging market equity fund inflows in early January more than doubled to $7.4bn, the highest level since April 2011, he added.

Loiseau said: “Now that there is a little more confidence, institutional clients feel they have more of an understanding of the situation in Europe and the perception is that there is less risk, and that is benefiting Asian equities.” Tora’s Ducker said he expected the Japan market to benefit from a global recovery, and tipped the smaller South-East Asian markets to benefit strongly from an expected US and European revival in equities.

Simmy Grewal, an analyst at Aite Group, said that banks and brokerages were also taking the opportunity to rethink their sales and execution distribution.

She added: “There was a massive expansion in the Asian businesses in 2009, but now firms are focusing more on having the right people in the right markets. We are seeing more specialists emerge with very good niche knowledge. Asia-Pacific is definitely not in the same position as the US or Europe. It is definitely in a much better mental state, and much more upbeat about where the market is going.”